Deal leaks in ASIC’s sights

The corporate regulator expects new surveillance technology to detect more instances of inappropriate or suspicious market behaviour this year as the debate on the leakiness of Australia’s financial markets continues.

The Australian Securities and Investments Commission (ASIC) conducted 102 market inquiries including insider trading, continuous disclosure and breaches of market integrity rules in the period from July to December 31.

The data, released on Wednesday, formed part of ASIC’s seventh supervisory update and reflected an increase from 86 inquiries in the year-earlier period. However, the regulator has been in the spotlight over the past six months amid criticism of its handling of shareholder concerns about trading by two David Jones directors in the retailer’s stock ahead of a sales update.

More recently, ASIC is examining trading in
Leighton Holdings
shares, which rocketed higher before a bid by controlling shareholder Hochtief.

ASIC used the supervisory report to highlight the resources it was ploughing into taking a tough stance against insider trading and other forms of market manipulation.

It also pointed out that its new technology – designed around trading algorithms – would help.

“With fewer but better calibrated alerts, it gives us more opportunity to look at a few more matters in even greater detail and better detect suspicious behaviour," ASIC senior leader, market and participant executive
Greg Yanco
said in an interview.

“I think we will see more detected over the next year as we get more experience using it."

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The report also showed that 31 matters – almost half of which related to alleged insider trading – were referred by ASIC to enforcement in the six-month period. That was up from 25 in the previous six months and 27 a year earlier.

ASIC’s update came as deal practitioners talked through disclosure, market leaks and due diligence at an Intralinks conference in Sydney.

Longer periods of due diligence aided deal success but most leaks relating to mergers or acquisitions were likely intentional as parties attempted to influence negotiations, a report by the Cass Business School and virtual data room provider Intralinks found.

“Australia is by far the leakiest market I’ve ever worked in ," said Bruce MacDiarmid, a panelist and co-head of Rothschild Australia.

Michael Parshall, a partner at Allen & Overy, said: “ASIC is far more diligent in this area because they are concerned about Australia’s reputation of being a leaky market."

The panel, which included Gresham managing director Charles Graham and PricewaterhouseCoopers managing director Matthew Millar, also talked through tactics, including maximising competitive tension or giving the impression tension existed even if there was only one interested bidder.